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Should You Sign a Non-Compete Agreement?

By Alan KotokNovember 17, 2008

On MSNBC today, contributor Eve Tahmincioglu
talks about the pros and cons of non-compete agreements–mainly the
cons. A non-compete agreement is a pact between you and your employer
in which you agree that, if you leave the company, you won’t go to work
for a company in the same line of business for a specified period of
time. It is often one of the forms you are asked to sign when you start
work with a new company.

Companies in competitive scientific and technology industries often ask
new hires to sign non-compete agreements. An employer may consider the
knowledge behind its marketable goods or services its competitive edge;
the non-compete agreement prevents another company from hiring away a
staff member–and their knowledge.

Tahmincioglu recommends that new hires resist signing non-compete
agreements because, she says, they make it difficult to change jobs
within the industry or to start a new business in the same field.
Worse, some non-compete agreements are written so that you are bound by
the agreement even if the company lays you off.

In a tough job market–like the one we’re in now–new hires will be
tempted to sign these agreements even if they hurt their long-term
interests. Tahmincioglu offers a few ideas that may give new hires a
little more flexibility.

First, know what you’re getting into. Check with your state’s labor
department or an attorney on the legality and scope of non-compete
agreements. According to attorneys quoted in the article, courts in
different states interpret non-compete clauses differently. Florida
courts, for example tend to side with employers, while California is
friendlier to employees.

Second, don’t be afraid to suggest alternative language. The article suggests narrowing the scope, for example, so you might have a chance at landing a job at a company in a related but not competitive industry.Tahmincioglu
says the employer may say "take it or leave it," but who knows? You
won’t know if you don’t try (tactfully, of course … it is your first
day on the job after all).

Third, if you are laid off by the company and stuck with its
non-compete agreement, try and negotiate lifting the agreement as part
of your severance package. Here again, check what the law allows in
your state or city; a layoff may negate being held to a non-compete
agreement. You may have more success escaping the non-compete agreement
when leaving a company than when entering it.

5 comments on “Should You Sign a Non-Compete Agreement?”

This was a really great article, thank you for sharing it! I work at a staffing firm in Boston, Hollister (www.hollisterstaff.com/?=451) and get asked by the clients I place about signing non-competes quite frequently. I really like what you have to say, and will pass this along next time I get asked about them. Thank you again!